Why Argentina is Buying Billions in Dollars Outside the Market
Argentina's central bank has successfully stabilized the peso, limiting its weakening to less than 1% in November, by shifting its strategy from targeting specific exchange rates to curbing daily volatility. President Javier Milei's administration is now pivoting toward accumulating foreign reserves through "off screen" block trades direct purchases from institutions that bypass the open market to avoid triggering inflation or panic selling. For instance, the Treasury recently purchased $320 million outside standard channels to prepare for $4.5 billion in upcoming bond payments, a move that effectively eclipsed the daily trading volume of the formal currency market.
This strategy relies heavily on liquidity provided by corporate and provincial debt issuers, such as Vista Energy and the province of Córdoba, who must convert their dollar bond proceeds into pesos for local operations and coupon payments. While this approach helps the government amass necessary reserves, analysts warn that releasing more pesos into the economy to purchase these dollars could reignite inflation, which currently sits at 31% annually. The central bank plans to loosen its grip on the peso's trading range next year, a move that aims to normalize the market but risks introducing new volatility into an economy where the exchange rate serves as the primary anchor for prices.